Compass Diversified (CODI) Q2 2024 earnings summary

Executive summary

• Q2 2024 results exceeded expectations, with net sales rising 11% to $542.6M, led by strong branded consumer businesses such as Lugano, BOA, and PrimaLoft, despite industrial segment weakness and macroeconomic headwinds.

• Branded consumer vertical now represents about half of EBITDA, with Lugano, BOA, and PrimaLoft as key drivers; The Honey Pot Co. acquisition further strengthened the portfolio.

• Industrial vertical experienced revenue and adjusted EBITDA declines due to weak demand and partner churn, but management remains confident in a 2025 rebound.

• Recent strategic moves include the acquisition of The Honey Pot Co. for $380M and divestitures of Crosman, Marucci, and Advanced Circuits, supporting capital recycling and portfolio optimization.

• CODI targets $1B subsidiary adjusted EBITDA by 2028, leveraging business transformation, capital allocation, and the launch of a healthcare vertical.

Financial highlights

• Q2 2024 consolidated revenue was $542.6M, up 11% year-over-year, with gross margin improving to 47.8% from 44.5% in Q2 2023.

• Adjusted EBITDA for Q2 was $105.4M, up 27% from $82.9M in Q2 2023; Adjusted Earnings reached $39.8M, up from $29.2M.

• Net loss of $13.7M in Q2 2024, compared to net income of $17.1M in Q2 2023, due to a $24.6M loss on the sale of Crosman and goodwill impairment at Velocity.

• Year-to-date pro forma revenue and adjusted EBITDA increased by 4.9% and 16.6%, respectively, versus the same period in 2023.

• Cash and cash equivalents at June 30, 2024, were $68.4M, with $543.6M available under the revolving credit facility.

Outlook and guidance

• 2024 full-year Subsidiary Adjusted EBITDA guidance maintained at $480M–$520M; branded consumer vertical guidance raised to $365M–$395M, industrial vertical lowered to $115M–$125M.

• Full-year Adjusted EBITDA expected between $390M and $430M, and Adjusted Earnings between $148M and $163M.

• Focus areas for 2024 include sales growth via new products, international expansion, and disciplined acquisitions, with margin pressure expected from wage inflation and higher freight costs.